4 ms·

"Finally one of the challenges with moving to a centrally managed pricing solution like what works so well in Canada and most of Western Europe is right now R&D

by spangry 10y ago

"Finally one of the challenges with moving to a centrally managed pricing solution like what works so well in Canada and most of Western Europe is right now R&D into pharmaceuticals is largely financed by the opportunity size available in the US market. If you were to just adopt the centralized model tomorrow R&D would grind to a stop, at least for some period of time until we found new ways to finance it." That would be bad. Based on 5 minutes of googling and 10 minutes of reading, the largest US pharma company is Johnson & Johnson. Their latest earnings report has the following for the 12 months in 2016 (not all expenses are listed here): - Sales (i.e. revenue): $71.8bn - Marketing expense: $19.9bn - R&D expense: $9.1bn - After tax, after expenses profit: $16.5bn So, on behalf of my fellow Australians, I'd just like to thank J&J for selling into my country at a substantial loss (and, in doing so, bravely running the risk of breaching their fiduciary duties to their shareholders). I'd also like to express my gratitude to consumers in the United State, who are apparently so generous that they are willing to subsidise my country's single-purchaser medical system. It's a shame you can't have one as well, but at least you have the world's gratitude for your sacrifice. USA #1! EDIT: Link - http://files.shareholder.com/downloads/JNJ/4178180194x0x924921/BCDFDBBF-7CC2-49FF-8ECF-3EC12FC88406/JNJ_News_2017_1_24_Financial_Releases.pdf http://files.shareholder.com/downloads/JNJ/4178180194x0x9249...

xadhominemx 10y ago
Less than half of JNJ's revenues is pharmaceuticals, so not a great example to be honest.
- spangry 10y ago
  Actually it's a pretty good example. In Australia, medicines and medical devices (i.e. 81% of J&J revenue) are regulated by the same body (the TGA) using the same approach, craftily reasoning that sick people need both. I realise you might see thing differently (i.e. better) in the USA, but I guess that's just part of what makes you exceptional!
  - xadhominemx 10y ago
    Medical devices and pharmaceutical companies have different cost structures, so I maintain my point that J&J is not a good example of a pharmaceutical cost structure. But you did 10 minutes of Googling so I defer to you I guess.
  - WalterBright 10y ago
    "Johnson & Johnson's brands include numerous household names of medications and first aid supplies. Among its well-known consumer products are the Band-Aid Brand line of bandages, Tylenol medications, Johnson's baby products, Neutrogena skin and beauty products, Clean & Clear facial wash and Acuvue contact lenses." -- https://en.wikipedia.org/wiki/Johnson_%26_Johnson
    - spangry 10y ago
      Literally every single one of those products listed fall under their 'Consumer Segment' (see pages 7 & 8 of financial statements in original post). The entire consumer segment accounts for 18.5 per cent of their total revenue. The remaining 81.5 per cent of their revenue comes from the sale of pharmaceuticals and medical devices.
      - WalterBright 10y ago
        The original post was listing the "consolidated" figures. Marketing of consumer products was not broken out separately from the consolidated figures. The information in the pdf does not support the narrative of the original article, because of the use of consolidated figures.
jessriedel 10y ago
With all the sarcasm, it's hard to tell how broad of a point you're trying to make. Do dispute the fact that Australia free-rides to a non-trivial extent on US medical R&D?
- spangry 10y ago
  Yes I do dispute that notion. Actually I dispute the entire idiot notion that the US is somehow subsidising the rest of the worlds' healthcare. In actual fact, pharmaceutical / medical device companies will simply charge whatever the market will bear, and it just so happens the US market will bear almost any price. If some market won't bear a profit making price, pharma companies simply won't sell into it. It makes utterly no sense to sell at a loss and then cross subsidise using the massive rents extracted from US markets, yet that is exactly what most people here seem to think is happening. Although maybe Trump really has managed to 'make America great again'. Speaking of great... The US spends 17.1% of of its GDP on healthcare. The 5 countries that are richer than the USA (GDP per capita) pay an average of 7.77%. Excluding Qatar, it's 9.03%. The top 10 richest countries (excluding the USA) spend an average of 8.03% of their GDP on healthcare, and I'm pretty sure at least a few of these have universal public health insurance. You're paying more than DOUBLE compared to the 9 other richest countries in the world. You're simply getting gouged. If you can't even admit that maybe there's a problem here, and instead want to persist with all these insane American exceptionalist fantasies, it's unlikely anything is going to change in American healthcare. Data from here: http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?end=2014&start=2014&view=bar&year_high_desc=false http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?end=2014&... And here: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi... (using IMF GDP figures)
  - jessriedel 10y ago
    That's a long rant that doesn't even address the standard econ 101 argument. It's especially weird to quote spending data since that's what one would expect if the US was subsidizing the world.
    - 10y ago
vilmosi 10y ago
>> So, on behalf of my fellow Australians, I'd just like to thank J&J for selling into my country at a substantial loss Are they really making a loss in Australia? Your source doesn't say that.
vonmoltke 10y ago
> Marketing expense: $19.9bn Here I go tilting at this windmill again... "Selling, marketing, and administrative expenses" (SMA) is not just marketing or advertising. It is all the costs of operating the company that are not either R&D or direct costs of producing products sold.
WalterBright 10y ago
Your link says that $19.9 is marked as "selling, marketing, and administrative expenses". It looks like a dumpster category for all kinds of expenses, not just "marketing".

by spangry 10y ago

xadhominemx 10y ago

Less than half of JNJ's revenues is pharmaceuticals, so not a great example to be honest.

spangry 10y ago
Actually it's a pretty good example. In Australia, medicines and medical devices (i.e. 81% of J&J revenue) are regulated by the same body (the TGA) using the same approach, craftily reasoning that sick people need both. I realise you might see thing differently (i.e. better) in the USA, but I guess that's just part of what makes you exceptional!
- xadhominemx 10y ago
  Medical devices and pharmaceutical companies have different cost structures, so I maintain my point that J&J is not a good example of a pharmaceutical cost structure. But you did 10 minutes of Googling so I defer to you I guess.
- WalterBright 10y ago
  "Johnson & Johnson's brands include numerous household names of medications and first aid supplies. Among its well-known consumer products are the Band-Aid Brand line of bandages, Tylenol medications, Johnson's baby products, Neutrogena skin and beauty products, Clean & Clear facial wash and Acuvue contact lenses." -- https://en.wikipedia.org/wiki/Johnson_%26_Johnson
  - spangry 10y ago
    Literally every single one of those products listed fall under their 'Consumer Segment' (see pages 7 & 8 of financial statements in original post). The entire consumer segment accounts for 18.5 per cent of their total revenue. The remaining 81.5 per cent of their revenue comes from the sale of pharmaceuticals and medical devices.
    - WalterBright 10y ago
      The original post was listing the "consolidated" figures. Marketing of consumer products was not broken out separately from the consolidated figures. The information in the pdf does not support the narrative of the original article, because of the use of consolidated figures.

jessriedel 10y ago

With all the sarcasm, it's hard to tell how broad of a point you're trying to make. Do dispute the fact that Australia free-rides to a non-trivial extent on US medical R&D?

spangry 10y ago
Yes I do dispute that notion. Actually I dispute the entire idiot notion that the US is somehow subsidising the rest of the worlds' healthcare. In actual fact, pharmaceutical / medical device companies will simply charge whatever the market will bear, and it just so happens the US market will bear almost any price. If some market won't bear a profit making price, pharma companies simply won't sell into it. It makes utterly no sense to sell at a loss and then cross subsidise using the massive rents extracted from US markets, yet that is exactly what most people here seem to think is happening. Although maybe Trump really has managed to 'make America great again'. Speaking of great... The US spends 17.1% of of its GDP on healthcare. The 5 countries that are richer than the USA (GDP per capita) pay an average of 7.77%. Excluding Qatar, it's 9.03%. The top 10 richest countries (excluding the USA) spend an average of 8.03% of their GDP on healthcare, and I'm pretty sure at least a few of these have universal public health insurance. You're paying more than DOUBLE compared to the 9 other richest countries in the world. You're simply getting gouged. If you can't even admit that maybe there's a problem here, and instead want to persist with all these insane American exceptionalist fantasies, it's unlikely anything is going to change in American healthcare. Data from here: http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?end=2014&start=2014&view=bar&year_high_desc=false http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?end=2014&... And here: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi... (using IMF GDP figures)
- jessriedel 10y ago
  That's a long rant that doesn't even address the standard econ 101 argument. It's especially weird to quote spending data since that's what one would expect if the US was subsidizing the world.
  - 10y ago

vilmosi 10y ago

>> So, on behalf of my fellow Australians, I'd just like to thank J&J for selling into my country at a substantial loss Are they really making a loss in Australia? Your source doesn't say that.

vonmoltke 10y ago

> Marketing expense: $19.9bn Here I go tilting at this windmill again... "Selling, marketing, and administrative expenses" (SMA) is not just marketing or advertising. It is all the costs of operating the company that are not either R&D or direct costs of producing products sold.

WalterBright 10y ago

Your link says that $19.9 is marked as "selling, marketing, and administrative expenses". It looks like a dumpster category for all kinds of expenses, not just "marketing".